RATNAKUMARI KUMBHAT Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) IN this reference under Section 64(1) of the Estate Duty Act, 1953 (hereinafter called "the Act"), the following question has been referred for decision I

(2.) ONE B. M. Kumbhat died on June 25, 1962. He had on March 31, 1955, gifted Rs. 50,000 to each of his three minor sons, Sumant Kumar, Rajkumar and Sureshkumar. Mrs. Ratnakumari Kumbhat, the mother and guardian of the minors, accepted the gifts on behalf of the minors by a letter dated March 31, 1955. By the same letter of acceptance, she also requested the deceased to keep the money with him as deposit bearing interest at 7 1/2 per cent. In the books of account of the deceased his capital account was debited with a sum of Rs. 1,50,000 and corresponding credits were given in the accounts of the three minors. The deceased also executed three promissory notes promising to repay the deposits with interest at 7 1/2 per cent. By another declaration dated April 7, 1955, the deceased also affirmed the transactions. Interest due on these amounts were credited and withdrawals also were made. The entries in the minors' accounts as appearing in the books of the deceased were as under : <FRM>JUDGEMENT_572_ITR101_1975Html1.htm</FRM>

(3.) UNDER Section 44 of the Act, in determining the value of an estate for the purpose of estate duty, allowance shall be made for debts and encumbrances incurred or credited by the deceased subject to the condition that they were incurred or credited bona fide for full consideration in money or money's worth wholly for the deceased's own use and benefit. Section 46 imposes certain limitations on the allowance of debts. As the question for consideration hinges on the scope of this section it is necessary to set out the section in full: